Believe it or not, we’re in an economic recovery. But if you’re not in the upper 7 percent of American households, you may not realize it. If you’re among the rest, i.e., 93 percent of American households, you may still be feeling pinched.
According to a report released April 23 by the Pew Research Center, “wealth inequality widened dramatically during the first two years of the economic recovery, as the upper 7 percent of American households saw their average net worth increase 28 percent while the wealth of the other 93 percent declined,” writes Michael A. Fletcher in the Washington Post. The uneven recovery has only accelerated a decades-long trend of growing wealth inequality in the country, despite rising popular and political awareness of the dynamic.
From 2009 to 2011, the Pew report says, the average net worth of the nation’s 8 million most affluent households jumped from an estimated $2.7 million to $3.2 million. And for the 111 million households that form the bottom 93 percent, average net worth fell 4 percent, from $140,000 to an estimated $134,000, the report said.
These changes mean that between 2009 and 2011, “the wealth gap separating the top 7 percent and everyone else increased from 18-to-1 to 24-to-1” and that “the most affluent 7 percent of households owned 63 percent of the nation’s household wealth in 2011, up from 56 percent in 2009.”
Why such a disparity in net worth? Mostly it’s because the wealthiest households have their assets concentrated in stocks and other financial instruments, while others’ wealth is concentrated in their homes. During the recovery, stock values have rebounded and reached new highs, while housing values have stayed mostly flat.
This widening gap applies to all Americans, but “the last half-decade has proved far worse for black and Hispanic families than for white families, starkly widening the already large gulf in wealth between non-Hispanic white Americans and most minority groups, according to a new study from the Urban Institute,” writes Annie Lowrey in an April 28 article in the New York Times.
The Urban Institute study found that while the wealth gap widened, the income gap between white Americans and nonwhite Americans remained stable, writes Lowrey. “As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years. But when it comes to wealth—as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances—white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute’s analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.”
By the most recent data, the average white family had about $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families, the report said.
Two major factors helped to widen this wealth gap in recent years. The first is that the housing downturn hit black and Hispanic households harder than it hit white households, in aggregate. Second, black families suffered bigger hits to their retirement savings, the Urban Institute found.
Without changes to government policies, it’s only going to get worse. “The Urban Institute suggests reforming government policies that encourage savings but disproportionately benefit the already wealthy and families with high incomes, like the home mortgage interest deduction,” writes Lowrey.
Such a wealth gap is far from the justice Jesus called us to practice.